Entrepreneur to buy UK refinery from Murphy Oil, turn focus to diesel

US entrepreneur Gary Klesch is buying the Milford Haven oil refinery on the coast of Wales, and betting on ailing European refining industry can only move up.

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By RUPERT ROWLING

Bloomberg

Gary Klesch, the investor buying a UK oil refinery at risk of
being shut, is betting the plant can make a profit by making
different fuels and changing where it sells them.

The Milford Haven plant in Wales will make more fuels like
diesel when it starts processing again later this year and
less gasoline, Klesch, the founder of Klesch Group, said by
phone on July 31 after the deal was stated. A higher
proportion of the refinerys output will be sold in the
UK rather than shipped to the US, he said. Murphy Oil Co.,
the seller, said in April it might close Milford Haven if a
buyer couldnt be found.

European oil refineries are shutting or converting to storage
depots at the fastest pace in decades as competition
intensifies from plants in the US, Russia and the Middle
East. While the region has a gasoline glut, it also faces a
looming shortage of diesel, Greenergy Fuels Ltd., the
UKs biggest buyer of automotive fuels, said in March.
Klesch bought a refinery in Heide, Germany, in
2010.

Our success with the German refinery gives us the confidence
to go forward and be confident of making a success of this
one too, Klesch said. We will look to get it up
and running as soon as we close the deal at the end of
October.

Milford Haven is the smallest of seven refineries in the UK
and can process 135,000 bbl of crude, according to data
compiled by Bloomberg. Thats equal to about 13% of the
nations total fuel-production capacity.

Refineries Closing

Klesch agreed to buy the plant from Murco Petroleum Ltd., a
unit of Murphy, for an undisclosed price. The deal is subject
to conditions. The transaction should be completed by October
and refining should start soon after,
Klesch said.

Sixteen European refineries, including
Coryton in the UK, closed in the past six years, according to
the International Energy Agency, a Paris-based adviser to 29
nations. Eni SpA, Italys largest oil
company, began negotiations earlier this month to shut as
much as 50% of its 774,000 bpd capacity.

Kleschs operations include trading, according to the
companys website. The purchase fits in with the
companys strategy of expanding its refining business, according to
Wood Mackenzie, a consulting firm.

As a trader, having a refinery gives you a big
advantage in the market, Jonathan Leitch, a
London-based senior analyst at Wood Mackenzie, said by phone
on July 31. It gives you flexibility because you never
get left with a distressed cargo.

Maximizing the diesel yield of the refinery will be one of the
companys first targets, Klesch said. The plant
currently has an output of 33% for both diesel and gasoline,
according to the UK Petroleum Industry Association.

We will also look to focus more on inland sales,
Klesch said. Instead of selling wholesale, we will look
to sell retail in an effort to capture more of the UK
domestic market.

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